How You Can Use a Trust in New Jersey for Gifting
Gifting to a Trust makes a lot of sense
Gifting a Life Insurance Policy to an Irrevocable Life Insurance Trust May Now Be a Valuable Estate Planning Tool, Depending on the Future of the Federal Estate Death Tax.
In appropriate estate planning situations, the use of an irrevocable trust can serve as a powerful New Jersey and Federal tax savings tool. Life insurance proceeds kept outside your taxable estate through proper planning can provide liquidity to estate heirs for a host of purposes.
There are two ways that an irrevocable life insurance trust (ILIT) can be effectively implemented: (1) the trust can be established initially and the trustee can subsequently take out and own a life insurance policy on the life of a named individual, or (2) an existing, or in-force, life insurance policy can be transferred to the trust. However, in the latter case, the insured must survive the policy’s transfer to the trust by a period of three years or the insurance proceeds will be included in his or her gross estate for estate-tax purposes (IRC Sec. 2035). This is tricky material. Feel free to contact Fredrick P. Niemann, Esq. at fniemann@hnlawfirm.com or call him toll-free at (855) 376-5291 for a low-cost consultation to better the use of Life Insurance Trusts.
Maximize Tax-Free Gifting and Creditor Protection with the Use of a Trust
Grantor Trusts for Gifting as Part of NJ Estate Planning
An individual can also make tax-advantaged lifetime transfers to a loved one through a grantor trust.
A grantor retained annuity trust (GRAT) can be set up to pay the grantor a fixed annuity for a term of years. Thereafter, the remaining trust principal passes to the trust’s beneficiaries.
Then there is a GRIT (grantor retained interest trust (GRIT)) which differs from a GRAT in that, instead of paying a fixed annuity to the trust grantor, the grantor receives all the trust’s annual accounting income. At the end of the term, the named beneficiary receives the remaining trust property.
Using a Trust in New Jersey as a Charitable Gifting Strategy
Lifetime gifting or testamentary transfers of property to a qualified charity are two types of strategies used commonly in the estate planning of a donor’s assets. Charitable gifts or charitable testamentary transfers can achieve a number of objectives. The most common reasons for gifting property to a qualified charity include the following:
- The satisfaction of knowing the charity will benefit from the gift.
- Lifetime gifts of appreciating property to a qualified charity remove all future appreciation of the property from your gross estate, thereby preventing the donor’s estate tax liability from increasing.
- Lifetime gifts of income-producing property can reduce your income tax liability.
- You can reduce gift tax liability or avoid gift tax liability altogether by making lifetime gifts to a qualified charity.
If you want to reduce estate, gift, and income taxes, you can establish an estate plan that combines both lifetime gifts and testamentary gifts. Testamentary gifts to qualified charities can reduce or avoid estate tax liability. A careful examination of both types of techniques can maximize tax savings in all three areas. Before making gifts to qualified charities as part of your estate plan, a qualified New Jersey estate planning attorney needs to analyze your financial position to determine whether you can afford to make a gift to a donee charity.
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Conclusion
Fredrick P. Niemann Esq.
A single individual who has a taxable estate needs to look beyond the common solutions that are appropriate for a married person; the same applies to a married person. The use of various gifting techniques can help a client accomplish estate tax-saving goals while minimizing exposure to transfer taxes.
If you should have additional questions, call Fredrick P. Niemann toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com to set up a consultation at your convenience. He is easy to talk to, very approachable, and will explain your options in plain, simple English.
Written by Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a New Jersey Trust Attorney